Sebi allows exchanges to modify commodity derivatives contracts

Sebi allows exchanges to modify commodity derivatives contracts

Sebi has classified non-material modifications as symbol, description, tick size, strikes, margins etc The Securities and Exchange Board of India (S

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Sebi has classified non-material modifications as symbol, description, tick size, strikes, margins etc

The Securities and Exchange Board of India (Sebi) has decided to give more flexibility to exchanges regarding modifying contract specifications for all commodity contracts.

The regulator has today allowed exchanges to carry out non-material modifications themselves and report to the regulator and market participants at least 10 days in advance.

The regulator has also allowed exchanges to modify contract specifications themselves for material modifications for all running contracts that have ‘nil’ open interest and those yet-to-be-launched contracts. These modifications shall require approval from Product Advisory Committee and approval of Regulatory Oversight Committee to be obtained post facto. Such changes need to be brought before and market participants at least one month ahead of their scheduled date of application.

has asked exchanges to get prior approval from it for material modifications which shall require deliberations and approval from PAC and ROC before seeking the regulatory approval.

“The permission to modify contract specification parameters of commodity contracts is subject to the condition that before introduction of any modification in contract specifications the exchanges shall inform and market participants along with reasons for the modifications as per the timeline given. However, this shall not apply to certain modifications which are required to be effected immediately considering the exigencies of the situation as per surveillance measure,” said a Sebi circular.

Currently, exchanges approach Sebi for approval for changes.

Sebi has classified non-material modifications as symbol, description, tick size, strikes, margins etc. For material modifications with “nil” open interest, the regulator has defined as last trading day, trading unit, price quote, delivery centre, premium and discount etc.

The third category which requires Sebi’s approval 30 days in advance with broad based deliberations, the Sebi defined as contract launch calendar, trading period, daily price limit etc.

“The changes in contract modifications would bring in transparency. They would also have both positive and negative sides of impact. But, exchanges that were implementing changes with short notice, would require now to streamline the process of modifications,” said Kishore Narne, Associate Director, Motilal Oswal Financial Services Ltd.

First Published: Thu, November 14 2019. 19:04 IST

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